The Federal Trade Commission has negotiated settlement agreements with two New Jersey men -- Donald Hellinger and Robert Ostroff -- and their companies, charged with decep- tively promoting credit cards and other products or services via 900 numbers. The settlements call for a total of $15,000 in consumer redress, and would prohibit the defendants from understating the cost of calling their 900 numbers or making other alleged misrepresentations, require them to disclose certain material information in connection with future promo- tions, and bar them from assisting others engaged in similar deceptive practices. The settlement with Hellinger also would require him to obtain a $250,000 bond to protect his customers before engaging in telemarketing; and to obtain a similar bond to protect customers of any direct mail campaign he runs unless he provides full refunds within 30 days to dissatisfied customers.
The defendant corporations, all based in New Jersey, are Interactive Marketing Concepts, Inc., of Marlton; Advanced Marketing and Promotions, Inc., of Mount Laurel, and Consumer News Service, Inc., also of Mount Laurel. Hellinger is president of Interactive Marketing and was an officer and director of both Advanced Marketing and Consumer News Service, and Ostroff is an officer of both Advanced Marketing and Consumer News Service, according to the FTC complaint setting forth the charges in the case. The companies are now inactive and without assets.
According to the FTC, the individual defendants and some or all of the defendant corporations engaged in three kinds of alleged schemes designed to entice consumers to call 900 numbers. One scheme allegedly touted "genuine" Visa and MasterCard credit cards for which anyone could qualify; another involved purported ways to help consumers save more than $4,000 a year on grocery bills; and a third involved sending postcards allegedly conveying that packages supposedly were being held for consumers after failed attempts at delivery. In fact, the FTC charged, the credit cards were "secured" cards that required consumers to keep a minimum of $300 on deposit to secure the credit line, pay a $60 application fee, and meet minimum qualifying criteria; the grocery promotion turned out to be a lengthy recorded message about how to redeem cents-off coupons; and the packages were not being held by a postal carrier and contained merely unsolicited merchandise.
Consumers who called the defendants' 900 numbers usually were charged from $9.95 to $24 per call, the FTC charged, adding that, in the grocery bill savings scheme, the actual charge for listening to the entire message was more than four times what the defendants had advertised. Moreover, the complaint states, consumers did not learn about key aspects of the promotions or the additional charges until they already had placed the 900 number calls and incurred the charges.
As to their roles in the schemes, the complaint alleges that some or all of the defendants placed print ads in general circulation newspapers, produced and placed television commercials, and sent consumers official-looking postcards. Some defendants also licensed the television commercial to other marketers, for whom the defendants provided telephone scripts and other services, the FTC alleged.
In a 1993 case, the FTC filed charges against American Standard Credit Systems, Inc., the company that created the print ads for the credit cards, and three California men, also for deceptively promoting the credit cards. The judge in the case subsequently entered a judgment against the defendants.)
The proposed consent orders to settle the FTC charges, which require the court's approval to become binding, contain prohibitions against misrepresentations similar to those each defendant allegedly engaged in as part of the challenged schemes. The settlements also would require the defendants to disclose certain material information when advertising or marketing any product or service. In connection with marketing any credit-related product or service, for instance, they would have to clearly and prominently disclose the fact that a card is secured, the amount of any security deposit, the minimum qualifying criteria, and the total cost of applying for and obtaining the card. Another provision in the settlements would bar the defendants from assisting others that they know, or should know, are misrepresenting or deceptively failing to disclose material qualifying information.
The settlements also address the fact that the two individual defendants have faced federal law-enforcement action in connection with similar schemes. Hellinger would be required to post a $250,000 performance bond before engaging in telemarketing and certain direct marketing activities; the money would be used to redress any injury to his future telemarketing customers. Both settlements also contain detailed recordkeeping and reporting requirements that would aid the FTC in detecting any deceptive direct-mail or telemarketing activities early.
Finally, the settlements would require Hellinger to pay $10,000 and Ostroff to pay $5,000. If giving refunds to consumers proves impracticable in this case, the money will be deposited in the U.S. Treasury. If these defendants are found to have misrepresented their financial condition, the settlements would permit the FTC to reopen the matters and seek additional redress.
The Commission vote to file the complaint and proposed consent orders in court was 5-0. They were filed this morning in U.S. District Court for the District of New Jersey, in Newark.
NOTE: These consent orders are for settlement purposes only and do not constitute admissions by the defendants of law violations. Consent orders have the force of law when signed by the judge.
Copies of complaints and proposed consent orders are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC File No. 912 3010)
(Civil Action No. not available at press time.)